Publishers get into the business for a multitude of reasons. They stay in business by making informed decisions that enable them to turn a profit, title by title.

With a comprehensive profit-and-loss (P&L) system, publishers can model costs, forecast sales, and decide on print runs, formats, and pricing strategies. “You can’t manage what you don’t measure,” says Lawrence Knorr, CEO of Sunbury Press. “As your list grows, knowing what is profitable and what is not is essential for survival.”

A Versatile Resource

“We use P&L at every stage of the process,” says Joe Biel, CEO of Microcosm Publishing. “When we acquire a title, when the market or economy changes, if production values change, and when we need to reprint or create a new edition.”

For acquisitions, P&Ls are an opportunity to model revenues and costs to assess a project’s profit potential. “It allows the acquisition committee or person to evaluate multiple book publishing proposals and rank them for potential success,” says Douglas Pfeiffer, who taught P&L classes in association with PubWest and now runs his own consulting firm for publishers. “If the budget only allows for a few manuscripts to be accepted, the title P&L assists in selecting those for publication.”

Making informed decisions upfront means there’s less need to adjust later, says Keira Lopez, chief of staff at hybrid publisher Indigo River Publishing. “By laying out all expected costs—printing, production, distribution, royalties—we’re able to set realistic pricing anchors and recommend the best format and print run based on the book’s potential,” she says. “We also conduct what we call a royalty roundup, a mockup of the costs associated with every title based on format and distribution type.”

Using this data, publishers can adjust retail prices in the model to decide how best to price the book in each format, Pfeiffer says. “If a title P&L is not producing the desired percentage margin, raising the retail price by a small percentage will improve the result more than reducing the title’s cost by the same small percentage,” he says.

Pfeiffer advises publishers to create a similar P&L 12 to 18 months post-publication so they can revisit forecasts in light of actual sales data. “The goal is to compare both title P&Ls to understand what caused each variance and how to be more accurate in the future,” he says.

With the 80/20 rule in mind—approximately 20% of the books will drive approximately 80% of the revenue—Knorr points out that P&Ls can also help publishers identify “winners” that sustain the rest of the list. “To align with this statistical reality, we manage our list based on a typical ABC-mover strategy,” he says. “The As generate most of the revenue and are very profitable. The Bs are steady winners. The Cs are break-even or slight losers. The Ds are usually not long on the list. They lose money.”

For creating P&Ls, publishers have several options. At Indigo River, Lopez uses Excel worksheets. “It gives us full control to customize each title’s sheet, which is helpful since we work across traditional, hybrid, and cooperative publishing models,” she says.

Publishers can also tie their P&Ls into accounting or CRM platforms. At Sunbury, Knorr tracks per-title costs in QuickBooks. Another option is Microcosm’s WorkingLit title management platform, which creates custom reports tracking revenue and expenses by title. WorkingLit also projects monthly revenues over 10 years. For publishers who want to try the platform, there is no charge for the first 10 ISBNs, and IBPA members get a discount on the paid options.

No matter how publishers create their P&Ls, Pfeiffer suggests keeping them on shared drives where team members can access and modify their sections as needed. At a large house, that team might include the acquisitions editor, production manager, sales and marketing managers, and possibly the publisher.

P&L Components

The first component of the P&L is the sales forecast, Pfeiffer says. Projections are made by format—hardbound, trade paperback, e-book, audiobook, mass market—offset by associated costs. For each anticipated format and sales channel, Pfeiffer recommends projections of gross unit sales, returns, and net unit sales.

Publishers may project sales figures using comparable in-house titles or comparables published elsewhere. For the latter, Circana Bookscan is a helpful resource (IBPA discount available). Pfeiffer also recommends that publishers factor into their sales projections an author’s platform, prior titles, and the title’s marketing budget. P&Ls also include a section for calculating revenue, also called net sales, calculated with a formula that multiplies net units sold by the list price for each format minus discounts paid to distributors and/or retailers.

Another section of the P&L covers the cost of goods sold (COGS). Here, Pfeiffer suggests accounting for the costs of paper, printing, and binding associated with different types of print runs: print on demand (POD), short run (less than 1,000 copies), and offset printing. COGS figures also include royalties and freight-in expenses—that is, the cost of freight from the printer to the warehouse where inventory is stored. If a publisher includes title development costs in the COGS, Pfeiffer notes they should also include those costs in the inventory value, with an option to amortize those expenses to keep the inventory cost down.

Expressed as a percentage, gross margin is the next calculation: revenue minus COGS, divided by revenue. “Gross margins of 50% or higher are typically good for trade book publishers,” Pfeiffer
says. “Significantly lower gross margin percentages may be a sign of high manufacturing costs, high inbound freight costs, or high royalty percentages.”

Finally, the P&L includes direct costs: sales commissions, warehousing and fulfillment expenses, and marketing costs. By calculating the direct cost percentage—that is, the percentage of revenue that direct costs will represent—publishers can determine a project’s contribution margin. Mathematically, the contribution margin is the difference between the gross margin percentage and the direct cost percentage, a  figure that allows publishers to weigh the comparative potential of acquisition opportunities.

P&Ls may also designate a percentage of revenue for overhead. “The argument for not including overhead costs in a title P&L is that the acquisition team has no control over overhead costs,” Pfeiffer says. “It is impracticable to burden them with the other costs of running the business.”

As a hybrid publisher, Lopez uses different P&L models to fit the project’s structure. “In a traditional model, the publisher is covering the full investment, so the P&L focuses on how and when that investment is expected to be recovered,” she says. “In a hybrid or cooperative model, the author is investing as well, so the focus shifts to things like recoupment, shared expenses, and a more collaborative approach to revenue. These models allow us to take on projects we really believe in while also sharing the risk and reward with the author.”

Data-Driven Decisions

Publishers use P&L data to make a multitude of decisions. “We rely on P&Ls to build out different sales scenarios,” Lopez says. “We usually create a conservative model, a realistic one, and a more ambitious stretch goal, depending on the genre, the author’s platform, and comparable titles. These projections help us decide how much to budget for marketing, what kind of print run makes sense, and whether we should pitch to retail outlets or focus more on direct-to-reader strategies.”

Biel explains how Microcosm used a P&L to make decisions about Dr. J.J. Pursell’s annotated Culpeper’s Complete Herbal. “We looked at the competitive titles, our costs, and the size of a print run necessary to reach our desired pricing,” he says. “We needed to start with 10,000 copies, which admittedly felt bold.”

The P&L data gave Microcosm the needed reassurance to proceed with their ambitious goal. “We had to drop about $40,000 to create that book,” Biel says. “But in addition to being a beautiful book with lots of rad artwork, we knew that even if we only sold two copies to each relevant store, we could slowly work through 10,000 copies, even if it took a few years. So we took risks, but they were informed by the data.”

Post-publication, P&L data becomes a means of measuring success. “Once the book is out in the world, we continue updating the P&L so we can track how close we are to expectations and make adjustments as needed,” Lopez says. “If you only look at them once or twice, you’re missing out on their
full value.”

Regardless of how publishers use them, P&Ls are only as good as the data they enter. “It’s easy to be overly optimistic,” Lopez says. “But accurate numbers lead to better planning and stronger relationships. Start with a basic structure, build on it as you grow, and don’t be afraid to adjust as you learn more from each project.” Useful as they are, P&Ls have limitations. For instance, Pfeiffer warns that a P&L should not be used to criticize staff or departments. “Use the knowledge gained to improve the data you input and make it a stronger tool for your team,” he says.

P&L Power

Constructed and used properly, title P&Ls are powerful tools that help publishers create cost scenarios, predict sales, and determine formats, print runs, and pricing. “The difference of using P&L is the difference between applying for a random job and applying for a job that you are qualified to excel at,” Biel says. “Sure, we all might win the lottery, but it’s a lot more fun to know that you made informed choices based on all the information available at the time—and had a glorious outcome.”

Don’t Forget These Costs

• Even the savviest publishers sometimes overlook line items that affect profitability. Here are key costs you should be sure to include in your P&L:
• Inbound freight: Shipping from your printer to the warehouse
• Author copies: How many will you provide, and are they discounted?
• ISBN and barcode fees: Especially if you're not using a bundle service
• Returns: Retailers can send back unsold inventory— factor it in!
• Sales commissions: If you use outside reps or services
• Fulfillment fees: Picking, packing, and shipping costs
• Platform or distributor fees: Especially for e-book and audiobook platforms like Amazon KDP or Findaway

P&L Terms to Know

• Net Sales: Revenue after subtracting discounts and returns
• Formula: (Units Sold – Returns) × (Retail Price – Discount)
• Cost of Goods Sold (COGS): The direct cost to produce and deliver the book, including printing, royalties, and inbound freight
• Gross Margin: How much you make after subtracting COGS from your net sales
• Formula: (Net Sales – COGS) ÷ Net Sales
• Direct Costs: Expenses tied directly to selling the book—marketing, fulfillment, sales commissions, etc.
• Contribution Margin: What’s left after both COGS and direct costs—a key number for decision-making
• Formula: Gross Margin % – Direct Cost %
• Overhead: General business expenses like office rent, salaries, or insurance—often excluded from title-specific P&Ls but worth understanding

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